I think we are pretty much in agreement as to what the docs say, but not necesarily as to when particular clauses apply or not. My views are that:
- if they sell the assets (or subs), they can't get the money out to pay themselves unless they pay the preferred first;
- if they sell the company (i.e. as majority shareholders), whoever buys it keeps the preferreds as they are.
The clause by which they get the "liquidation preference" paid in case of a sale pretty much means that they need to make sure that they get at least their preference AND the amount needed to pay the preferreds, and even then the preferreds get the money first. (The question really becomes, "is a sale of assets, or the subs, and the distribution of proceeds a liquidation?") I can't figure out a scenario where they sell assets, get the money out, and do not pay the preferreds.
Now, regarding the common, I would argue that the decission to sell the company (or its assets), which would in any case be made by the board, could be seen as unfairly benefitting the convert holders if the common gets nothing. The board is there to make sure ALL shareholder's interests are protected. If the common gets nothing, then why sell? Just so the convert can be paid off? That is a biased decission, would't you agree? A court might easily find that objectionable, IMO.
